Navigating Your Health Insurance Deductible

Ok, so you have health insurance. But it’s really expensive, and you hardly get to use it. You may even wonder, “what good is it?” If so, the culprit here may be what I call the “dreaded deductible.”

Whether your health coverage is provided by your employer, you run a small business, or you buy your own insurance, health plans these days typically require that you spend an annual deductible of as much as $2,000 to $3,000 or more on medical services before any of your care gets reimbursed. Unless you break a leg, need a diagnostic test, or wind up in the hospital for a few days—thereby spending “out-of-pocket” enough to meet your deductible—it may seem like you’re getting little to nothing back each year from your health plan.

And that’s despite laying out a typical monthly premium of $300 to $500 for individual coverage, and much more for a couple or for your family. While premiums and deductibles are generally less for plans offered by your employer, the fees you must lay out before your coverage kicks in still can be plenty hefty.

For example, a single person’s annual premium of $4,800 (that’s $400 a month times 12 months), and an additional annual deductible of $3000, adds up to a total of $7,800 a year. If you’re healthy and don’t spend beyond your deductible for a primary care visit or other medical services, it may seem like money spent on buying health coverage is just a waste.

Save With Premium Discounts

While on the subject of premiums, I want to digress briefly to note that there are some valuable premium discounts available for folks with lower incomes who buy coverage regulated by the Affordable Care Act also known as Obamacare. The price of insurance offered through the Obamacare state marketplaces can be offset somewhat with federal tax credits and premium subsidies available based on income. For individuals, the annual income cutoff for this financial help in New York is $48,560. It’s $60,000 a year for a couple and $100,000 for a family of four.

The Kaiser Family Foundation, a terrific health information resource, provides an online calculator to determine if you or your family qualify for a tax credit or subsidy. In some instances, these income-based discounts can cut spending on premiums by half or even more.

But these days, even expensive insurance provided by your boss, or available from your state’s marketplace, typically restrict reimbursement for dental and vision care, psychotherapy or alternative medical services like acupuncture. It’s also increasingly common for the relatively affordable plans to require that you only use a restricted “network” of providers in order to get the most comprehensive coverage for care. Use a doctor or dentist outside the network and your out-of-pocket bill for the service can balloon. As a result, I find these days that when conversations turn to health care, along with a few choice epithets, many people grumble that health insurance just doesn’t seem worth the cost anymore.

Penalized For Being Healthy

My so-called “dreaded deductible” may even feel as if you’re being penalized by insurers for staying fit, not smoking, eating well, and just keeping healthy. In a saner setup, we’d be rewarded for keeping ourselves well and our costs low. Instead, the healthy among us are being financially punished by being charged for the minimal care we might use before we meet the annual deductible.

If that’s how things are for you, you might want to consider several strategies to relieve some of the deductible pain. One increasingly popular option, called a health savings account, or HSA, is an insurance tool that can help to reduce your out-of-pocket spending, increase your nest egg, and slash a bit off your annual income taxes.

First off, though, a few comments about the deductible and how health insurance has changed in recent years. There was a time not that long ago when large-sized deductibles didn’t exist. For most of those insured, the annual out-of-pocket spending required before reimbursement were minimal, maybe a few hundred dollars a year, and certainly less than $1,000. Copays—the amount you contribute when a service is reimbursed—were as low as five to 10 dollars per provider visit. The copay back might represent 10 percent to 20 percent of a pricey medical procedure or hospital stay. But even, the copay bill might be limited once you spent up to the annual deductible was met.

Better Health Care Consumers

As health costs have exploded, taking a bigger bite out of employer profits, companies have offloaded some of these growing health expenses to their workers by instituting higher and higher deductibles. This is a good trend, argue some economists. It forces health consumers to be more aware of their health bills and stingier in their use of medical services. Responsible for a greater portion of the cost of care, we consumers might price shop for care just as we do for most other products we buy, or so this argument goes.

Take, for example, auto insurance, where high deductibles have long been commonplace. Nobody expects auto coverage to reimburse for minor expenses like an oil change or tire rotation, even if these services keep your car in tip-top shape. Instead, we look to car insurance to protect us from going bankrupt should we incur steep damages in an accident. Deductible fans say health insurance should work similarly, protecting us from catastrophic medical costs while we “self-insure,” or pay out-of-pocket, for less expensive ones.

For those of us who are young and fit, auto insurance-like catastrophic plans make sense. Where offered, these super-high deductible plans can have the lowest and most affordable premiums. Critics counter, however, that catastrophic health plans with high deductibles may cause folks to put off preventive care or cutback on prescription drugs. In fact, some studies show that high deductibles don’t make us better health care shoppers. Instead we just wind up paying a greater percent of our medical charges.

Health Savings Accounts

As there likely is no turning back from the high deductible trend, good ole Uncle Sam is offering a helping hand in the form of health savings accounts, made possible through a relatively new wrinkle in the nation’s Internal Revenue Service rules. These HSAs work like the 401k retirement savings plans many companies offer employees. Each pay period, you can direct your company to put some portion of your salary—let’s say $50 to $100—into a savings account. You can draw on it at any time to pay for a doctor visit or a psychotherapy session that isn’t covered by your insurance plan, perhaps because you haven’t yet hit your annual deductible. Money banked in an HSA can pay for eye exams and eyeglasses, over-the-counter medicines, vitamins and health supplements, transportation to a provider, and in some cases, even yoga classes.

As with 401k plans, the amount you accumulate each year in your HSA is considered to be pre-tax or tax-free dollars. Every dollar you place into the HSA reduces the amount of income you are taxed. Under IRS rules, the most an individual can deduct from annual salary and place into an HSA is $3,500. Families can fund the HSA with up to $7,000 a year. Those 55 and older can deposit an additional $1,000 annually.

Here’s a helpful example. Let’s say you are in a 24 percent tax bracket. If you deposit $3,500 in a year, you will save $840, or .24 times $3,500. A family putting in $7,000 would reduce their taxes by $1,680.

Shopping For An HSA

If your employer doesn’t yet offer an HSA as an option in its health plan, if you are self-employed or own a business, you can have the savings plan set up by a financial institution such as Fidelity or Vanguard. This online source is one of several that helps consumers shop for HSA plans: https://www.hsasearch.com/. There’s no reason why you can’t lobby your human resources department to include an HSA in the company’s annual set of health plan options. Although, keep in mind, HSA’s are typically only paired with specific plans, such as a high deductible plan. So, just make sure to do your due diligence and learn all about the plan the HSA will come attached to before you make the decision.

As HSA’s become more popular, many plans are providing additional options approved by the IRS. For example, some HSA’s let you invest your money sitting in the account in certificates of deposit, or mutual and index funds. This benefit is usually only available in HSA plans that allow you to roll over money left in the HSA from one year to the next. Some plans, however, require you to “use or lose” the deposited money if it’s not used by year’s end, or at least by the following March. Some plans require you to submit receipts—often online, while other plans provide users a debit card to allow for more easily charging expenses.

There are variations of the HSA concept that provide similar tax savings but allow for use in wider types of expenses. These variants allow the pre-tax dollar to pay for child care, elderly parent care, gym memberships and even a physical trainer.

Granted, however helpful these HSA’s are in providing some savings, compared to the large and growing size of annual health plan deductibles, the benefit is still limited. In other words, we health care consumers have to search out innovative ways to be cost-conscious.

The Slingshot Health Approach

One new way for consumers to reduce the costs of a high deductible is right here at Slingshot Health. The platform offers patients the convenience of getting a same-day (or soon after) appointment by selecting the type of provider or care desired by location.

Providers, on the other hand, may accept bids based on their open time slots during the day, which are largely due to last-minute cancellations. In a potential money saving feature, patients seeking an appointment are also asked to name the amount they want to pay for the visit. In this way, Slingshot Health is the first of its kind, working as an online healthcare marketplace for consumers and providers to connect directly for receiving and giving care.

This is a win-win for patients and providers. It helps consumers keep the cost down for out-of-pocket expenses, and helps providers deal with lost revenue from last-minute appointment cancellations. (For now, the online service is available only in Manhattan, and parts of New York’s Westchester County and New Jersey).

Michael Waldholz is a Pulitzer Prize winning healthcare journalist and author. For many years, he was the chief medical reporter at the Wall Street Journal.While we have a host of health-related subjects we plan to cover in the Healthcare Matters series, please feel free to send any questions you have for the author or our team to info@slingshothealth.com, and don’t forget to follow us on Facebook, Twitter, and Instagram.

About Slingshot Health

Slingshot Health is a health tech startup that brings top healthcare providers and patients together. Patients bid on the cost of services and healthcare providers accept bids based on availability. Slingshot Health is unique in that it is a mutual marketplace putting both patients and providers back in control. Visit us at slingshothealth.com.

About Slingshot Health

Slingshot Health is a health tech startup that brings top healthcare providers and patients together. Patients bid on the cost of services and healthcare providers accept bids based on availability. Slingshot Health is unique in that it is a mutual marketplace putting both patients and providers back in control. Visit us at slingshothealth.com.